"It sends a message about the state of Maryland that we value a not-for-profit culture, that we're not trying to enrich people based on people's health needs," said Del. Shane Pendergrass, a Howard County Democrat and vice chairman of the Health and Government Operations Committee. "I have said consistently that no one is worth $18 million."
Nancy Fiedler, a spokeswoman for the Maryland Hospital Association, said the compensation not paid out to Jews could be used to help the community. CareFirst BlueCross BlueShield agreed this year to fund a $7 million annual program to help seniors bridge a coverage gap under Medicare for prescription drugs.
Tyler's decision in the case follows 4 1/2 days of hearings in late April that yielded a transcript of 1,400 pages and 200 exhibits. It comes nearly two years after Jews left the company - he says he was told that board members were concerned about lingering legislative and news media attention stemming from the 2003 controversies.
Jews is widely credited with helping to shore up CareFirst's finances. After becoming a hospital CEO before turning 30 years old, he was recruited by what was then Blue Cross Blue Shield of Maryland. The company had been under scrutiny for mismanagement and lavish spending and had a scant $25 million reserve. Jews set about reorganizing the company and engineered a series of mergers and other initiatives that led to the creation of CareFirst.
The company's membership more than doubled, and its reserve grew to $1 billion by the time of the proposed sale. Jews said that maintaining a healthy reserve was important to keeping insurance rates stable and ensuring that the company had enough cash for capital improvements.
Then CareFirst sought permission to convert to for-profit operation and sell the company for $1.3 billion to WellPoint Health Networks Inc. Objections from regulators and consumers centered on whether such conversions were in the public interest. Steven B. Larsen, who was insurance commissioner at the time, eventually blocked the transaction largely because of benefits for Jews and other CareFirst executives built into the deal.
Tyler's decision calls into question the performance-based salary and bonus system the insurer uses to reward executives and associates. CareFirst argued that Jews' pay was in line with similar nonprofit Blues plans and that the $18 million was earned pursuant to a valid employment contract. The company also noted that CareFirst's board, which was reconstituted after the 2003 legislation was enacted, had approved it after hiring consultants to review the terms.
Attorneys for the state said Jews' compensation was flawed from the start because it was linked to CareFirst's profits, giving executives incentive to deviate from the insurer's nonprofit mission.
laura.smitherman@baltsun.com
paul.adams@baltsun.com
